SME business optimism dips for 3rd straight quarter

SMEs are still looking for opportunities to grow, even as business expansion expectations dipped from 5.45 to 5.41 for the first half of this year. PHOTO: ST FILE

Business sentiment among Singapore small and medium-sized enterprises (SMEs) eased again for the third quarter in a row, even as they remained marginally optimistic about the outlook for the first six months of this year.

The latest Singapore Business Federation (SBF) - DP Info SME Index score fell slightly from 51 to 50.7, indicating an increase in caution among the 3,600 SMEs polled between October and November last year. But despite the downtrend, a score above 50 still signals an expectation of growth.

The sector that showed the biggest decline in sentiment was construction and engineering, followed by retail and food and beverage, and transport and storage.

Turnover expectations by SMEs continued to decline on the back of an uncertain macroeconomic environment, down from 5.22 to 5.13. This directly impacted profitability expectations, which also fell from 5.19 to 5.07.

A score above five indicates expectations of an increase, while a score below that indicates possible declines.

Among the sectors, construction and engineering, commerce and trading, and manufacturing are anticipating negative profit growth.

The study also showed softer capital investment expectations for the next six months, which fell from 5.21 to 5.16, as SMEs take a wait-and-see approach in view of the murky outlook ahead.

This coincides with companies holding back capital investment commitments ahead of possible changes in government initiatives and schemes in the upcoming Budget 2019, according to the report.

SMEs are still looking for opportunities to grow, even as business expansion expectations dipped from 5.45 to 5.41 for the first half of this year.

In particular, SMEs in the business services sector and the transport and storage sector are expecting to expand - likely a result of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which came into force on Dec 30 last year, as well as the signing of the Asean e-commerce agreements.

Mr Ho Meng Kit, chief executive officer of SBF, noted that it was a relief to see that the appetite for business expansion is "still healthy", even as the survey was conducted at the height of the US-China trade tensions.

"Given the ongoing trade tensions and slower economic growth climate, it is even more pertinent that our companies stay nimble and are quick to take advantage of opportunities that may arise from the diversion of trade and reshuffling of global supply chains."

He said businesses should continue to innovate and transform, as well as tap the extensive network of free trade agreements that Singapore has signed.

Mr James Gothard, general manager of credit services and strategy for South-east Asia at DP Info's parent Experian, added: "SMEs are likely to look forward to supporting measures announced in Budget 2019 to overcome near-term challenges, as well as enable them to capture future opportunities."

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A version of this article appeared in the print edition of The Straits Times on January 14, 2019, with the headline SME business optimism dips for 3rd straight quarter. Subscribe